Why the rich must be the first to pay for the climate crisis

The New Statesman interview

The economist and author of the Green New Deal talks money, men and malpractice with Philippa Nuttall.

Growing up in apartheid South Africa in the 1950s, Ann Pettifor knew the world was deeply unjust. During her childhood in the conservative, Afrikaaner-dominated towns of Odendaalsrus and Welkom, she first observed, and then fought, racism and regression. Unwilling to go to jail for her beliefs, she left her home for England, preferring to battle for a fairer and more equal society through disruptive economic ideas rather than the violent disorder of many of her peers.

Welkom – or “welcome” in Afrikaans – was a gold-mining town in what was then Orange Free State. In 1995, the first post-apartheid government renamed it Free State. Despite the name, the province was not a welcoming place, in particular for Indians who had been barred from ever setting foot there, remembers Pettifor. But it was not just the racism that caught her attention. From a young age she was also puzzled as to why the price of gold had been fixed at $35 an ounce since 1933. It was, she learned, because the US president Franklin D Roosevelt had set it at that level as part of his New Deal, a decision upheld under the international monetary system agreed at the 1944 Bretton Woods conference. And so began Pettifor’s fascination with international finance.

At the University of the Witwatersrand in the 1960s, Pettifor became an anti-apartheid activist. But increased action by the “special branch” of the police against students demanding an end to segregation sent her fleeing to England after she graduated. In London, she put her economics and politics degree to use, advising the Labour Party and leading the Jubilee 2000 campaign to cancel the debts of the world’s poorest countries. But it is the climate crisis that now holds much of her attention. In recent years, she helped found the Green New Deal group of economists, environmentalists and entrepreneurs, which puts globalisation and financial deregulation at the root of the climate crisis. 

I sat down for coffee with Pettifor in a hotel in the chic Sablon quarter of Brussels. The previous evening she had given a lecture at Bozar, the city’s art deco Centre for Fine Arts, treating the audience to a whistle-stop tour of Keynesian theory and the relevance of Keynes’s call, after the June 1919 Treaty of Versailles, for a new economic system to replace the gold standard. The old order, Keynes posited, had “led to a form of globalisation that benefited the wealthy, but impoverished the majority” and ultimately destabilised financial and political order, Pettifor has written. For her, the same rot continues today, destroying social and natural ecosystems. 

At the heart of Keynes’s thinking was an international financial framework governed by public, not private, authority. Fast forward to 1933, and this approach, which was ultimately rejected by world leaders after the First World War, was adopted by Roosevelt, who on the night of his inauguration began dismantling the gold standard. With his New Deal, Roosevelt freed his administration to invest in the economy, end the unemployment crisis and tackle the Dust Bowl, the ecological crisis of the day, summarised Pettifor.

Instead of tinkering with the current system, or blowing it up totally, Pettifor wants leaders – as outlined in the Green New Deal she co-authored – to take their lead from Keynes and Roosevelt, overhaul the central banking system and focus on bringing the lifestyles of the super rich into check. “The green movement has lost its way by making us feel we are all equally responsible for the [climate] crisis,” said Pettifor. Instead of “globalisation”, she argues for a financial architecture based on the “internationalism of labour”, or the “internationalism of the 99 per cent”.

“Globalisation has caused international coordination, cooperation and multilateralism to evaporate, and raised political tensions worldwide, as in the 1930s,” said Pettifor. One reason we are “paralysed” and unable to make the shift necessary to halt climate change is that “the idea of asking millions of people overnight to transform their lifestyles is hugely daunting”. This approach is dangerously misguided, she believes. Instead, she backed the call by UK climate scientist Kevin Anderson to focus on the wealthiest 10 per cent, responsible for 50 per cent of global emissions – and especially the top 1 per cent.

By concentrating on frequent fliers, big yacht and private jet owners, “we could bring down emissions massively, very quickly” and make the rest of us feel this was a fair solution, she said. If people are asked to change their boiler at a cost of £20,000 they wonder what they’ve done wrong, when the threat of climate change is largely because “a very powerful section of the population [is] massively over-emitting”.

Pettifor referenced the attempt by the French government in 2018 to introduce a carbon tax that would have pushed up the price of fuel – a key factor in the rise of the gilets jaunes movement. She is firmly against such measures. “The French experience was fascinating. It showed us it is very unfair to tax people. It is so regressive. The French baker with a little white van to deliver his bread has no alternative way of getting around.” First, the state must provide an alternate, such as improved public transport, “and then you may then want to tax your baker and he would feel it was fairer because he had been given a choice”.

For alternatives to be built and paid for, “governments and central banks need to step up”. The state must provide the “frameworks within which the private sector can make the transformation”, placing “far more terms and conditions on those who use central bank resources” and reorientate the financial system for the benefit of green, sustainable activities, said Pettifor. “Nobody invests in productive income-generating activity because it is expensive and time-consuming and hard. It is far easier to speculate; to just gamble on whether bitcoin or the stock market or oil will go up or down.” Failure to move away from a system focused on making money, rather than creating jobs and protecting our ecosystems, means “we have underemployment, underinvestment and instability”.

Blocking such change are today’s “strong men”, she believes. The need to shift the financial system and control how central banks operate, “is a total anathema to the Elon Musks and the libertarians that govern our world”. Pettifor is likewise “outraged” by the message from John Kerry, the US climate envoy, at Cop26, the recent international climate conference, that private business should be relied on to fill the climate finance gap, while governments “sit on their hands and wait for Mr Larry Fink to come along and fix the whole thing”. The CEO of the world’s largest money-management firm manages assets worth more than $12trn. At Cop, Fink said his firm had raised $673m to fund “climate-focused infrastructure” in developing countries. “I think this is insulting,” said Pettifor.

And we are all partly to blame for the status quo, she suggested, by continuing to “think money, finance and economics is for the chaps in pinstriped suits, not for us. That has to change, especially for the greens who pride themselves on their [economic] virginity. This is not rocket science, it is not difficult physics: we all understand exchanges rates, supply and demand. We’ve all used money and interest rates.”

One way to kickstart this transformation in the UK would be to reform the Tax Payers’ Alliance, she argued. It exists today to fight for lower taxes. Instead, it should get citizens to push for taxes to be deployed in the interests of the ecosystem and the economy – not those of the City of London – and for big companies like Amazon to pay their taxes in the country where they do business, said Pettifor. We have power as taxpayers and we should use it, she insisted.

For Pettifor, the pandemic and the way “the public knuckled under” in 2020 is proof people are ready and willing to act on the climate crisis. “People have the ability to make sacrifices and changes because they have social impact.” But we need guidance. “We go on shopping because this is what we are told to do. People are willing to be led, but they want fairness and justice.” Central to this is transforming the financial system. “Until we subordinate finance to productive, sustainable investment,” little, if anything will change, she warned.